When It Comes to Fast Food Restaurants, This Company Remains America's Favorite

By Markets Fool.com


Source: Flickr user ebruli.

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Few things are as valuable to us as our time. Just as the old idiom states, "Time is money," and we need to feel that we're getting good value for our time if we're paying for a product or service.

The rise of fast food
This idiom is what quick-serve restaurants, often referred to as fast food restaurants, live and die by. Quick-serve restaurants need to get customers in the door, served, and out the door as quickly as possible. But not only is the expediency of table turnover important, restaurants also need to ensure that they're still creating an inviting and unique experience with tasty food that will bring that customer back again. On paper it sounds so simple, but the practical application is a lot tougher.

A big reason success isn't a given relates to the sheer number of quick-serve restaurants consumers have to choose from. Data aggregator Statista notes there were 232,611 "fast food establishments" in operation in 2013. Statista estimates this figure climbing to near a quarter of a million by 2018.

This might seem like a lot, but a Gallup poll conducted in 2013 shows that 80% of Americans eat fast food at least once a month. Nearly half (47%) give into the temptation of a quick meal once a week! It's a big money business that generated $191 billion in sales in 2013, but it can certainly be difficult to stand out in a crowded field.


Source: Flickr user Steven Depolo.

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Brand loyalty makes all the difference
The only way for a quick-serve restaurant to truly succeed is to listen to its customers, be fluid with its menu, be responsive to their time constraints, and ultimately to forge an emotional connection with its customers. This "brand loyalty" isn't always easy to measure. Thankfully, for that we have Brand Keys and its 2015 Customer Loyalty Engagement Index.

Brand Keys is a New York-based research firm that specializes in understanding how consumers perceive a brand, compare that brand to other brands, and how businesses engage their brand with the consumer to forge a connection. Brand loyalty is important because loyal customers can generate free word-of-mouth positive advertising for a business. In addition, loyal customers aren't price sensitive, so they're more willing to accept price increases and buy higher margin items without thinking twice.

With that in mind, let's take a closer look at which quick-serve restaurant Americans are most loyal to out of the nine that Brand Keys evaluated.

Not-so-golden and deposed
Before we can establish why one company is the best at engaging its customers, we have to quickly walk through why a few popular names didn't take that honor.

Source: McDonald's, Facebook.

Coming in dead last in Brand Keys' brand loyalty rankings was McDonald's , whose arches are looking as far from golden as ever. McDonald's is dealing with a plethora of problems, including a menu that's too large for its own good (big menus can confuse customers), growing wait times in its drive-thru (largely a result of the large menu), and bad publicity tied to the wages it pays its employees. It's no wonder that McDonald's U.S. growth has been lackluster for multiple quarters now. It's also a disappointing fall as McDonald's ranked No. 2 in Brand Keys' CLEI for quick-serve restaurants in 2014.

But, McDonald's isn't alone. Quality Brands International , the parent of Burger King, didn't do too well either. Burger King managed just the No. 4 spot, beating out KFC, Taco Bell, Hardee's, Popeye's and the aforementioned McDonald's. While Burger King isn't having the same PR problems that McDonald's is dealing with, it simply doesn't have a menu driver to bring customers into its restaurants since its plan for years was simply to emulate McDonald's. With McDonald's also struggling, Burger King has been tasked with developing its own brand. While it's shown signs of improvement, Burger King clearly has a ways to go.

Source: Wendy's, Facebook.

Oh so close!
Coming in third, and performing best among the "burger chains" was Wendy's . Three big advantages Wendy's has over its burger chain peers are its recent renovations inside its stores, which have made them more inviting, a menu that's comparatively concise and easier to understand than its peers, and menu innovation that's led to healthier eating choices. This last point is particularly important since more than a third of adult Americans are overweight according to the Centers for Disease Control and Prevention. Wendy's innovation on the quick salad front has helped it appeal to a broader audience than its peers.

This year's runner-up for a second year is privately held Chick-fil-A. Although Chick-fil-A has had its rough patches with the media and public for commentary made by its founder, the tastiness of its food and its menu innovation continue to drive strong results. There's something for everyone on its menu, and it certainly caters to healthier eating habits.

America's favorite fast food restaurant
But topping Brand Keys' list as America's favorite quick serve restaurant chain once again is Subway.


Source: Subway, Facebook.

How has Subway kept its competition at bay and stood out from the pack?

First, Subway is perceived as a significantly healthier option among a sea of greasy fast food. Subway meals are apportioned to deliver a pre-determined amount of meat with a healthy portion of vegetables as requested by its customers. Also, it's considerably easier to modify your order at Subway than at a traditional fast food restaurant since you're completely in charge of how your sub is made. Instead of deconstructing a burger, you're building your own sandwich. This personalization and array of perceived healthy choices allows Subway to stand out with people short on time but who are still craving nutritious foods.

Source: Subway, Facebook.

Secondly, Subway has found a neat way to reward its most loyal customers: with a Subway rewards loyalty program. Customers receive a point for each dollar spent and can redeem those points for subs or a number of other menu items. Although loyalty programs can eat into the profitability of a restaurant, given the hypercompetitive nature of the fast food industry it's been very much worthwhile to Subway to use this tool to keep consumers loyal. Not to mention, loyalty cards help keep track of consumers' purchasing history so the company can better direct advertising that would be relevant and cause the consumer to take action.

Third, Subway's menu is really, really simple! While certain sandwiches may be on special in a given month, or are lower in calories than others, the Subway menu features 16 sandwich choices. Period. Compare that to McDonald's, whose menu has ballooned to nearly 150 items! A concise menu is critical to not confusing its customers.

Source: Subway, Facebook.

Fourth, Subway has everyone's bases covered. It offers breakfast sandwiches for early risers, healthier option kids meals, a salad complement to every sandwich it makes, and has its "Simple $6 menu" featuring value subs for those watching their wallet.

And finally, Subway is primarily based on the franchisee model. By franchising its stores to individual owners, Subway has been able to outpace the growth rate of its biggest competitors since initial franchise fees help pay for the construction or purchase of new locations. It's also a good way of minimizing growth risk. Not surprisingly, Subway managed to double its locations worldwide between 2003 and 2013 to approximately 41,000 locations.

Though I have no crystal ball, it would appear that Subway is going to be tough to unseat from its No. 1 ranking. Subway has all the tools (and the expansion model) necessary to keep outgrowing its peers, and if McDonald's and Burger King don't do something fairly quickly they could permanently become yesterday's news.

The article When It Comes to Fast Food Restaurants, This Company Remains America's Favorite originally appeared on Fool.com.

Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool recommends McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.